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Asia institutional investors increase real asset exposure

real estateAsian insurers and pension funds are forecast to grow their exposure to real assets in 2021, despite the effect of the Covid-19 pandemic, with a particular focus on healthcare, social housing and sustainable transport.

The findings come from a global survey of 1,000 institutional investors conducted by Aviva Investors, a quarter of which are based in Asia.

A key asset among the Asia-based investors is sustainable transport which is backed by 59% of insurers and 51% of pension funds.

The Covid-19 pandemic has strongly influenced the increased appetite for real assets, especially in Asia. The survey found that the move to home working and the need for more digital infrastructure was seen by more than 60% of Asian institutional investors as the greatest opportunity for real assets investing.

The rise in popularity of real assets has come at the expense of other asset classes with equities the most affected. Just 7% of Asian pension funds and insurers expect to increase their allocation to stocks.

Asian institutional investors are also the most committed to achieving net zero carbon emissions with 85% of insurers and 61% of pension funds having made the pledge.

The report does recognise that real assets world faces “stern challenges” in the next 12 months, not least the structural decline expected in sectors like airports, hotels and commercial real estate as a result of Covid-19.

However, while those sectors saw a 51% drop in worldwide transactions in Q2 compared with 2019, the industrial sector saw an increase in deal volume during the same period. The report also cites the boom in digital infrastructure and data centres and a renewed appetite for strong ESG credential as trends that offset the losses faced elsewhere.

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